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January 23, 2013

Hywind on location
Photo from Trude Refsahl / Statoil

Plans by the Norwegian energy giant Statoil to develop a $120 million wind turbine demonstration project off Maine's coast depend on whether state regulators approve the company's proposed electricity rate and contract terms at a meeting Thursday. The Maine turbines would look similar to the Hywind test turbine (seen here), now producing power off the coast of Norway.

$120 million Maine wind project faces key vote Thursday

By Tux Turkel
tturkel@pressherald.com
Staff Writer

Plans by the Norwegian energy giant Statoil to develop a $120 million wind turbine demonstration project off Maine's coast depend on whether state regulators approve the company's proposed electricity rate and contract terms at a meeting Thursday, says the project's manager.

"It's critical for us to have both federal and state support to build the project," Kristin Aamodt told the Portland Press Herald. "This decision Thursday is very important to be able to develop the project further."

Statoil is a large oil and gas producer that's using its experience in the North Sea to develop renewable-energy projects around the world. It launched the world's first floating turbine three years ago, off Norway.

If Statoil cannot refine its offshore floating wind turbine design in the Gulf of Maine, Aamodt indicated, the company may shift its efforts to Japan or Europe.

The Maine Public Utilities Commission is set to deliberate on Statoil's plan for Hywind Maine. The project would put four, three-megawatt wind turbines on floating spar-buoy structures tethered to the seabed in 460 feet of water off Boothbay Harbor.

They would be assembled onshore and towed to the site. Power could be flowing into the grid, via undersea cable, by 2016.

But the cost of that power, and the extent of the project's economic benefits for Maine, are at issue before the PUC. In October, when state regulators initially reviewed the plan, two of the three commissioners indicated they couldn't support it without lower power rates and clear enhanced benefits.

This month, Statoil came back with changes meant to address those concerns. The company says it cannot make further concessions. On Thursday, the PUC will consider whether Statoil has sweetened the deal enough for Maine to accept it.

Wind turbines are common in shallow water off Europe. Now, developers are testing technologies to locate them miles offshore, where the winds are better and coastal residents can't see them.

Supporters see Statoil's plan as Maine's best chance to help attract a deep-water wind-power industry that someday could create thousands of jobs and billions of dollars in investment.

"There are not a lot of billion-dollar industries knocking on the state's door," said Jeremy Payne, executive director of the Maine Renewable Energy Association. "This could decide whether Maine is going to be playing a role in the offshore wind industry, not only in the United States but across the globe."

Other countries want to develop deep-water wind parks, Payne said.

"We're in a race with Scotland," he said. "Maine's 2010 Ocean Energy Act said we want to an incubator. If we say no and Scotland says yes, that's going to be the end of the offshore wind industry in Maine for the foreseeable future."

But opponents, including paper companies and large power users represented by the Industrial Energy Consumer Group, say Statoil's proposal is too expensive and lacks sufficient assurances of benefits for Maine.

"Simply put," the group wrote in comments filed with the PUC on Tuesday, "if we as a state have $100 million or more to spend to address the critical issues of climate change and economic development, is this the best investment we can make, or would we be wiser to consider alternatives, including other renewable technologies, energy efficiency or facilitating greater use of low-carbon fuels?"

Statoil's latest proposal also falls short in the view of Gov. Paul LePage's administration.

In comments filed Wednesday, LePage's new energy director, Patrick Woodcock, said Statoil is signaling a "good faith" commitment to Maine manufacturing, but the proposal's wording fails to clearly demonstrate that Statoil would follow through on the investment, as required under the Ocean Energy Act.

"At a time when bids for manufactured goods can originate throughout the world, it is essential that when ratepayers are subsidizing a project of this magnitude, the investments in Maine be clear and absolute," Woodcock wrote.

Statoil's proposal is one of two that won $4 million grants from the federal Department of Energy last month to showcase innovative technologies and improve performance for offshore wind power. Both projects are competing for final awards of as much as $47 million.

The other project, Aqua Ventus, is led by the University of Maine and a team that include Cianbro Corp., Bath Iron Works and the Spain-based company Iberdrola, the world's largest wind power developer and the parent of Central Maine Power Co. That pilot project would float two, six-megawatt turbines off Monhegan Island.

The Statoil project is under the microscope now because it submitted a proposal to the PUC last year that included the rate it would charge Maine utilities for the electricity generated by the turbines. That rate worked out to a total of 29 cents per kilowatt hour, roughly double what Maine's household customers now pay for energy and delivery.

In its new proposal, Statoil trims the rate to 27 cents. That's still well above market rates and would total $186 million over the 20-year contract. But Statoil and its supporters point out that the cost would be spread among most Maine power customers. For an average household, which uses 550 kilowatt hours a month, it would add roughly 75 cents to an $82.50 bill.

The above-market rate would help provide capital for Statoil to develop a small-scale wind park that would take what the company has learned in Norway to the next step, said Aamodt, the Maine project manager.

In Norway, the Hywind project has exceeded performance goals, she said, generating power 50 percent of the time while surviving 50-foot waves and hurricane-force winds. But the single 2.3-megawatt turbine was expensive to build, roughly $62 million.

Research and development in Maine would help Statoil reach its goal of producing power at 10 to 15 cents per kilowatt hour in a commercial wind park in this decade.

"The technology is proven," she said. "We know it works. But we want now to cut costs. We want to deploy it in a park setting and use it to look at everything around, such as how to build a local supply chain, how to interact with fishermen."

The commitment to building that supply chain will be a key factor in the PUC's decision. In its new proposal, Statoil says it will aim, "to the greatest extent possible, to utilize local suppliers in the planning and execution phase of the project." It estimates that suppliers would employ 150 people full time during peak construction.

The company also pledges to locate its project operations center in Maine. It already has established a collaborative research and development relationship with UMaine's Advanced Structures & Composites Center for materials testing.

Statoil also says it would involve Maine contractors and suppliers in any large wind park development it undertakes on the Northeast before 2025. It pledges good-faith efforts to award contracts representing at least 10 percent of capital spending, $100 million, to qualified Maine-based suppliers and contractors.

The PUC commissioners will have to decide whether Statoil's commitments, as written, go far enough to satisfy Maine law and balance ratepayers' risk with an acceptable level of economic benefits.

In October, the PUC's chairman, Tom Welch, indicated that Statoil's initial proposal didn't go far enough. His skepticism was echoed by the newest commissioner, Mark Vannoy. Both men were appointed by LePage.

David Littell, the third commissioner and an appointee of Gov. John Baldacci, indicated that he supported the project as originally presented.

Last year, the PUC looked favorably on a pilot ocean-energy project with above-market rates. It approved a contract for Portland-based Ocean Renewable Power Co.'s tidal generator in Eastport. The rate is 21.5 cents per kilowatt hour, but the tiny, 180-kilowatt output of the initial phase has little impact on electricity bills.

 

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com





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